Venezuela sells Citgo refinery
Venezuela sells Citgo refinery
Venezuela's government has confirmed that it is considering the sale of its oil refining and distribution network in the U.S. amid a worsening economic crisis. Analysts said the proposed sale reflects the socialist government's urgent cash shortage.
Last week, the state-owned oil company Petroleos de Venezuela SA signaled its interest in a finding a buyer for U.S.-based Citgo Petroleum Corp. in a bond prospectus. On Tuesday, Oil Minister Rafael Ramirez said Venezuela will sell Citgo if the price is right, but added that the government is not in a hurry to make a deal.
The company, believed to be worth as much as $15 billion, has long been an unloved stepchild of the revolution. The late President Hugo Chavez called Citgo a "bad business" that contributed to the tax coffers of the United States and made no profit for Venezuelans.
He repeatedly floated the idea of selling the company, which operates refineries in Texas, Louisiana and Illinois and sells fuel through thousands of gas stations. Rival Gulf Coast refiners are seen as potential buyers.
Venezuela's government has long used its U.S. company as a political tool. Chavez had Citgo distribute discounted heating oil to low-income American families in a high-profile program aimed at criticizing Washington's approach to the poor. More than 1.7 million Americans have received oil from Citgo to keep warm during the cold winter months, according to the subsidiary. Many states initially rejected the program, but it was embraced by some. Former U.S. Rep. Joseph Kennedy II spoke out in its favor, saying Chavez cared about the poor at a time when the world elite turned a blind eye.
Venezuela, an OPEC member that has among the largest oil reserves in the world, is struggling to overcome an economic crisis after years of overspending that's fueled inflation now surpassing 60 percent. The government has restricted Venezuelans' ability to obtain dollars as oil production has declined, forcing imports to fall and leading to record shortages in an oil-dependent economy where manufacturing is thin.
Outside analysts say President Nicolas Maduro needs to loosen currency controls to restore balance to the economy. But the government's willingness to sell Citgo suggests a strong aversion to taking such dramatic steps, said Risa Grais-Targow, an analyst at the Washington-based Eurasia Group.
Juan Carlos Sosa, editor of the oil trade publication Energizing Ideas, said the sale of Citgo would give the government financial breathing space, but could rob the country of a major source of income over the long term. Much of Venezuela's oil goes to domestic consumption and to supply agreements with China, Cuba and other Caribbean allies. The barrels sold by Citgo in the U.S. market represent the only oil sold with net income, Sosa said.
"If Citgo is sold, we'll have to rely on a third party to sell that oil, and if that party does not want to buy our oil, it will be much more difficult to place because there are very few refineries worldwide capable of processing most Venezuelan crude, which is heavy and extra heavy," he said.